Ask Terry Questions Balance transfer to max out IRA?

Balance transfer to max out IRA?

By Terry Savage on January 28, 2020 | Financial Planning / Retirement

I just got a new credit card (was going to get regardless) and it happens to come with a no interest balance transfer period. I really want to max out my Roth IRA but know I can’t do this before the tax day deadline without some help. Does it make sense to get a balance transfer from this new card to contribute to my IRA? There is a 3% fee. I will not necessarily need the whole 6K from the transfer to accomplish this. Thoughts?

Terry Says

The road to credit hell is paved with balance transfers! Especially if you don’t have either the income or the discipline to pay it off before the interest-free grace period ends. Ask yourself why you didn’t plan in advance to have money to contribute to your Roth IRA if its suddenly so important?
I wouldn’t take this route. Keep your credit balances at zero, and set up a Roth at a place like Vanguard or Fidelity and have them take an automatic $500/month for your 2020 contribution. (You aren’t losing a deduction if you don’t make a contribution for 2019 –you’re only losing one year’s growth.) If you squirm at the idea of a $500/month automatic contribution in the year ahead, it means you’ll never get balance transfer cash advance paid off in a year!! And you’ve then answered your own question!

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